Mexico near-shoring taking hold

Wednesday, June 19, 2013

The Stifel Transportation and Logistics Research Group wrote Thursday it appears near-shoring in Mexico is taking hold, judging from discussion at the Nearshoring Mexico Summit held last week in Dallas by Armstrong and Associates.
“We heard of the northbound load imbalance from several presenters,” Stifel wrote in a note to investors. “Most agreed that it falls in range throughout the year (depending on seasonality) of two northbound loads for every southbound load to four northbound loads for every southbound load. However, as the lane imbalance has progressively worsened – even as the Mexican peso has strengthened, which has historically led to increased southbound loads – several cross-border transportation providers suggested that the nearshoring phenomenon is taking hold and is continuing to grow.”
Stifel said the reasons Mexico has grown in prominence with regard to near-shoring are myriad.
“In addition to the cost advantages (productivity, transportation, capital equipment, labor supply, etc.) and the service/quality (speed to market, flexibility, intellectual security, etc.) relative to China, Mexico has the most free trade agreements, covering over 50 countries, providing North America significant access to the rest of the world,” the investment bank said. “As a result of those free trade agreements, foreign direct investments have poured into Mexico and as a result, as one presenter put it, ‘Mexico has not seen a macro economy as good as it is now in the past 30 years. Discipline, stability, and a focus on not targeting risky moves has provided a platform for growth that will continue to support businesses and investments.’” - Eric Johnson